July 24 (Bloomberg) -- MasterCard Inc. and Vantiv Inc. are
among payment processors helping fuel a surge in deals this year
as they vie to stay ahead of emerging technologies and expand
globally.

The first six months saw 125 pending and completed deals in
the payments industry, a 76 percent increase from the first half
of last year and 29 percent more than the same period of 2012,
according to data compiled by Financial Technology Partners LP,
a San Francisco-based investment bank.

Consumers globally are replacing cash and checks with
electronic forms of payment including credit cards and mobile
phones. Established companies are scooping up smaller
competitors and merging with firms abroad amid a surge in new
technologies that make transactions faster and easier.

“The M&A activity we are seeing out there is defensive,”
Jay Gurandiano, a Deutsche Bank AG managing director who advises
on payment deals, said in a phone interview. “There’s
definitely an acceleration. People are ensuring that they are at
the leading edge of technology.”

Startups including San Francisco-based Square Inc., led by
Twitter Inc. co-founder Jack Dorsey, are creating competition
for networks and other processors such as Heartland Payment
Systems Inc. and First Data Corp. The new companies offer mobile
phone technologies that can make it easier and cheaper for small
retailers to accept money from customers.

‘Disruptive Models’

“There have been these new, disruptive models in the
payments space, and the old-line players who are flush with cash
but stuck with more legacy payments models have a lot of
firepower,” Sean Minnihan, who advises on financial technology
deals for GCA Savvian Inc., said in an interview. “They want to
invest.”

U.S. payments firms are also seeking to expand abroad,
where opportunities tied to consumers switching from cash to
electronic transactions are greater. The U.S. share of global
card transactions will decline to about 42 percent by 2018 from
about 45 percent in 2012, according to the predictions from the
Nilson Report, an industry newsletter. Asia-Pacific share is
estimated to climb to almost 25 percent from about 18 percent.

This year’s biggest acquisitions include Vantiv’s $1.65
billion purchase of Mercury Payments Systems Inc. in May. The
merger will allow Vantiv, based in Symmes Township, Ohio, to
help merchants integrate payments information with accounting
and customer data the retailers have on file, the company said.

More Consolidation

“Mercury was very attractive given its size,” Vantiv
Chief Financial Officer Mark Heimbouch said in a phone
interview. “We’re very much focused on what’s going on in the
market in terms of transitioning from traditional brick-and-mortar to e-commerce.”

Bain Capital LLC and Advent International Corp., both
private-equity firms, agreed in March to buy Ballerup, Denmark-based payments processor Nets Holding A/S for about $3.1 billion
to expand in Scandinavia. Visa Inc., the largest bank-card
network, said in May it bought the rest of GP Network Corp., a
Japanese processing company. Purchase, New York-based
MasterCard, the second-largest network, scooped up a software
firm in India and a card loyalty provider in Sydney as part of
its Asia-Pacific push.

Revenue from cards is helping counter declines in trading
and mortgage lending for some of the biggest U.S. banks. Card
revenue rose 3.1 percent on average in the first half of the
year at the five biggest U.S. commercial banks, with Wells Fargo
& Co., U.S. Bancorp and JPMorgan Chase & Co. reporting the
biggest gains. That compares with an average decline of 50
percent in mortgage revenue.

The value of deals worldwide across all industries doubled
in the first six months of 2014 to $1.9 trillion from the same
period last year, as the number of transactions climbed 14
percent, according to data compiled by Bloomberg.

“Payments is profitable and it’s a scale business,” Jay
Wilson, a vice president at advisory firm Mercer Capital in
Nashville, Tennessee, said in an interview. “To the extent that
deals come together -- that means you will just see more.”